Financial Management: Organizations Need Two Budgets

Organizations actually need two different budgets: business budget and innovation budget.

We often find that organizations actually need two different budgets. They serve completely different goals, and accordingly, their difficulty levels are completely different.

(1) The first kind of budget is the standard budget, that is, the business budget. This kind of budget is aimed at the current existing businesses, which we know and are familiar with. In this kind of budget, although we can't only extrapolate from the past to the future, the past and present data are useful, at least some reliable reference data. The key issue involved in this budget is: what is the minimum amount of resources needed to successfully maintain commercial operations? In this kind of budget, the traditional enterprise management thinking method is applicable and correct.

(2) The second budget is Opportunity Budget Regrettably, only a few enterprising enterprises will develop it. This kind of budget is targeted at new things, namely innovation.

This kind of budget will not focus on empirical data, because there is no experience to follow for new things. Because this budget contains many important uncertainties, it cannot be integrated into other conventional budgets. First, it will weaken the effect of operational budget; Secondly, in the business budget Uncertainty It also becomes ambiguous.

In the opportunity budget, we must pay attention to two issues: first, whether the resources we use are used for appropriate opportunities and innovation? Second, if so, what is the maximum amount of resources needed to truly seize the opportunity and achieve major success?

"Too few resources, too late allocation, and allocation in too many departments" are the main reasons for the failure of many public projects with good starting points and very important projects, as well as those in the business sector.

In a figurative sense, the motto of General Guderian, the German tank force in the Second World War - "Do not disperse resources when doing things" shows the key to the success of the new project. In other words, we should concentrate all our efforts on a few things and fully ensure their implementation.